EXHIBIT 4.5
FORM OF TRUST AGREEMENT
TRUST AGREEMENT
among
HOME EQUITY SECURITIZATION CORP.,
as Depositor and General Partner
________________________________
as Owner Trustee
and
________________________________
as Co-Owner Trustee
Dated as of__________________
__________ TRUST _________
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS ...................................................... 1
SECTION 1.1 CAPITALIZED TERMS .......................................... 1
SECTION 1.2 OTHER DEFINITIONAL PROVISIONS .............................. 5
ARTICLE II ORGANIZATION .................................................... 5
SECTION 2.1 NAME ....................................................... 5
SECTION 2.2 OFFICE ..................................................... 5
SECTION 2.3 PURPOSES AND POWERS ........................................ 5
SECTION 2.4 APPOINTMENT OF OWNER TRUSTEE ............................... 6
SECTION 2.5 INITIAL CAPITAL CONTRIBUTION OF OWNER TRUST ESTATE ......... 6
SECTION 2.6 DECLARATION OF TRUST ....................................... 6
SECTION 2.7 LIABILITY OF THE GENERAL PARTNER ........................... 7
SECTION 2.8 TITLE TO TRUST PROPERTY .................................... 7
SECTION 2.9 SITUS OF TRUST ............................................. 7
SECTION 2.10 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR;
COVENANT OF THE DEPOSITOR ............................................... 8
SECTION 2.11 FEDERAL INCOME TAX ALLOCATIONS ............................. 9
SECTION 2.12 COVENANTS OF THE GENERAL PARTNER ........................... 9
SECTION 2.13 COVENANTS OF THE CERTIFICATEHOLDERS ........................ 10
ARTICLE III RESIDUAL INTEREST INSTRUMENTS AND TRANSFER OF INTERESTS ........ 11
SECTION 3.1 INITIAL OWNERSHIP .......................................... 11
SECTION 3.2 THE RESIDUAL INTEREST INSTRUMENTS .......................... 11
SECTION 3.3 EXECUTION, AUTHENTICATION AND DELIVERY OF RESIDUAL
INTEREST INSTRUMENTS .................................................... 11
SECTION 3.4 REGISTRATION OF TRANSFER AND EXCHANGE OF RESIDUAL
INTEREST INSTRUMENTS .................................................... 11
SECTION 3.5 MUTILATED. DESTROYED. LOST OR STOLEN RESIDUAL
INTEREST INSTRUMENTS .................................................... 12
SECTION 3.6 PERSONS DEEMED CERTIFICATEHOLDERS .......................... 12
SECTION 3.7 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES
AND ADDRESSES ........................................................... 13
SECTION 3.8 MAINTENANCE OF OFFICE OR AGENCY ............................ 13
SECTION 3.9 APPOINTMENT OF PAYING AGENT ................................ 13
SECTION 3.10 RESTRICTIONS ON TRANSFER OF RESIDUAL INTEREST
INSTRUMENTS ............................................................. 14
SECTION 3.11 SECURITIES MATTERS ......................................... 15
ARTICLE IV ACTIONS BY OWNER TRUSTEE ........................................ 16
SECTION 4.1 PRIOR NOTICE TO CERTIFICATEHOLDERS WITH RESPECT
TO CERTAIN MATTERS ...................................................... 16
SECTION 4.2 ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO
CERTAIN MATTERS ......................................................... 17
SECTION 4.3 ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO
BANKRUPTCY .............................................................. 18
SECTION 4.4 RESTRICTIONS ON CERTIFICATEHOLDERS' POWER .................. 18
SECTION 4.5 MAJORITY CONTROL ........................................... 18
ARTICLE V APPLICATION OF TRUST FUNDS; CERTAIN DUTIES ....................... 18
SECTION 5.1 ESTABLISHMENT OF TRUST ACCOUNT ............................. 18
SECTION 5.2 APPLICATION OF TRUST FUNDS ................................. 18
SECTION 5.3 METHOD OF PAYMENT .......................................... 19
SECTION 5.4 SEGREGATION OF MONEYS: NO INTEREST ......................... 19
SECTION 5.5 ACCOUNTING AND REPORTS TO THE CERTIFICATEHOLDERS,
THE INTERNAL REVENUE SERVICE AND OTHERS ................................. 19
SECTION 5.6 SIGNATURE ON RETURNS: TAX MATTERS PARTNER .................. 20
ARTICLE VI AUTHORITY AND DUTIES OF OWNER TRUSTEE ........................... 20
SECTION 6.1 GENERAL AUTHORITY .......................................... 20
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SECTION 6.2 GENERAL DUTIES ............................................ 21
SECTION 6.3 ACTION UPON INSTRUCTION ................................... 21
SECTION 6.4 NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT,
THE BASIC DOCUMENTS OR IN INSTRUCTIONS ................................. 22
SECTION 6.5 NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS ............................................................ 22
SECTION 6.6 RESTRICTIONS .............................................. 22
ARTICLE VII CONCERNING THE OWNER TRUSTEE ................................... 23
SECTION 7.1 ACCEPTANCE OF TRUSTS AND DUTIES ........................... 23
SECTION 7.2 FURNISHING OF DOCUMENTS ................................... 24
SECTION 7.3 REPRESENTATIONS AND WARRANTIES ............................ 24
SECTION 7.4 RELIANCE; ADVICE OF COUNSEL ............................... 25
SECTION 7.5 NOT ACTING IN INDIVIDUAL CAPACITY ......................... 25
SECTION 7.6 OWNER TRUSTEE NOT LIABLE FOR RESIDUAL INTEREST
INSTRUMENTS OR LOANS .................................................... 25
SECTION 7.7 OWNER TRUSTEE MAY OWN RESIDUAL INTEREST INSTRUMENTS
AND NOTES ............................................................... 26
SECTION 7.8 LICENSES .................................................. 26
SECTION 7.9 RIGHTS OF CO-OWNER TRUSTEE ................................ 26
ARTICLE VIII COMPENSATION OF OWNER TRUSTEE AND CO-OWNER TRUSTEE ............ 26
SECTION 8.1 OWNER TRUSTEE'S FEES AND EXPENSES ......................... 26
SECTION 8.2 INDEMNIFICATION ........................................... 26
SECTION 8.3 PAYMENTS TO THE OWNER TRUSTEE AND THE CO-OWNER TRUSTEE .... 27
ARTICLE IX TERMINATION OF TRUST AGREEMENT .................................. 27
SECTION 9.1 TERMINATION OF TRUST AGREEMENT ............................ 27
SECTION 9.2 DISSOLUTION UPON BANKRUPTCY OF THE GENERAL PARTNER ........ 28
ARTICLE X SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES ........... 29
SECTION 10.1 ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE ................ 29
SECTION 10.2 RESIGNATION OR REMOVAL OF OWNER TRUSTEE OR CO-OWNER
TRUSTEE ................................................................. 29
SECTION 10.3 SUCCESSOR OWNER TRUSTEE OR CO-OWNER TRUSTEE ............... 30
SECTION 10.4 MERGER OR CONSOLIDATION OF OWNER TRUSTEE OR CO-OWNER
TRUSTEE ................................................................. 30
SECTION 10.5 APPOINTMENT OF CO-OWNER TRUSTEE OR SEPARATE OWNER
TRUSTEE ................................................................. 30
ARTICLE XI MISCELLANEOUS ................................................... 32
SECTION 11.1 SUPPLEMENTS AND AMENDMENTS ................................ 32
SECTION 11.2 NO LEGAL TITLE TO OWNER TRUST ESTATE IN
CERTIFICATEHOLDERS ...................................................... 33
SECTION 11.3 LIMITATIONS ON RIGHTS OF OTHERS ........................... 33
SECTION 11.4 NOTICES ................................................... 33
SECTION 11.5 SEVERABILITY .............................................. 34
SECTION 11.6 SEPARATE COUNTERPARTS ..................................... 34
SECTION 11.7 SUCCESSORS AND ASSIGNS .................................... 34
SECTION 11.8 NO PETITION ............................................... 34
SECTION 11.9 NO RECOURSE ............................................... 34
SECTION 11.10 HEADINGS .................................................. 34
SECTION 11.11 GOVERNING LAW ............................................. 34
SECTION 11.12 BANKRUPTCY MATTERS ........................................ 34
EXHIBIT A Form of Residual Interest
EXHIBIT B Form of Certificate of Trust
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TRUST AGREEMENT, dated as of ____________________, among HOME EQUITY
SECURITIZATION CORP., a North Carolina corporation, as General Partner and
Holder of the Non-Transferable Residual Interest Instrument (the "Depositor"),
_____________________________ a Delaware banking corporation, as Owner Trustee
(the "Owner Trustee") not in its individual capacity but solely as Owner
Trustee, and ____________________________, Co-Owner Trustee (the "Co-Owner
Trustee").
ARTICLE I
DEFINITIONS
Section 1.1 Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be amended and
supplemented from time to time.
"Administration Agreement" shall mean the Administration Agreement, dated
as of __________________ among the Issuer, _____________________ and
______________________, as Administrator.
"Administrator" shall mean _____________________________ or any successor
in interest thereto, in its capacity as Administrator under the Administration
Agreement.
"Basic Documents" shall mean this Agreement, the Sale and Servicing
Agreement, the Indenture, the Administration Agreement, the Custodial Agreement,
the Note Depository Agreement, and the other documents and certificates
delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code ss. 3801 et seq., as the same may be amended from time to
time.
"Certificate Distribution Account" shall have the meaning assigned to such
term in Section 5.1.
"Certificate of Trust" shall mean the Certificate of Trust in the form of
Exhibit C to be filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the register
mentioned and the registrar appointed pursuant to Section 3.4.
"Certificateholder" or "Holder" shall mean a Person in whose name a
Residual Interest Instrument is registered.
"Clearing Agency" shall mean an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
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"Code" shall mean the Internal Revenue Code of 1986, as amended, and
Treasury Regulations promulgated thereunder.
"Co-Owner Trustee" shall mean ____________________________________.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee located at
____________________________________________, Attention: Corporate Trust
Administration; or at such other address in the State of Delaware as the Owner
Trustee may designate by notice to the Certificateholders and the Depositor, or
the principal corporate trust office of any successor Owner Trustee (the address
(which shall be in the State of Delaware) of which the successor owner trustee
will notify the Certificateholders and the Depositor).
"Definitive Certificates" means a certificated form of security that
represents a Residual Interest Instrument.
"Demand Note" shall have the meaning assigned to such term in Section
2.11(b).
"DTC" shall mean The Depository Trust Company, as the initial Clearing
Agency.
"ERISA" shall have the meaning assigned thereto in Section 3.10.
"Event of Default" shall have the meaning assigned to such term in Section
5.1 of the Indenture.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"General Partner" shall mean initially the Depositor, or the successor
permitted by the Agreement.
"Indenture" shall mean the Indenture, dated as of ______________________,
by and between the Issuer and the Indenture Trustee.
"Indenture Trustee" means __________________________, as Indenture Trustee
under the Indenture.
"Insolvency Event" shall have occurred with respect to the Depositor if:
(i) a decree or order of a court or agency or supervisory authority
having jurisdiction for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the Depositor
and such decree or order shall have remained in force, undischarged or
unstayed for a period of 60 days; or
(ii) the Depositor shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings of or relating
to the Depositor or of or relating to all or substantially all of the
Depositor's property;
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(iii) the board of directors of the Depositor shall voluntarily
dissolve the Depositor; or
(iv) the Depositor shall admit in writing its inability to pay its
debts as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its
obligations;
provided, however, that the substantive consolidation of the Depositor with
an entity in respect of which the events described in (i) - (iv) above have
occurred shall not constitute an Insolvency Event with respect to the Depositor.
"Issuer" shall mean _______________ Trust ________, the Delaware business
trust created pursuant to this Agreement.
"Majority Residual Interestholders" The Holders of more than an aggregate
50% Percentage Interest of the Residual Interest.
"Minimum Net Worth" means as of any date of determination, and with respect
to the General Partner, net worth equal to ____% of the aggregate value of the
Residual Interest Instruments. For the purpose of the determination of Minimum
Net Worth: (i) any Demand Note issued to the General Partner shall be valued at
par, (ii) assets subject to a lien shall be valued at zero, (iii) the Residual
Interest Instruments or any other interests in any entity taxable as a
partnership for federal income tax purposes shall be valued at zero, (iv)
investments shall be valued at their respective purchase prices plus accrued
interest, and (v) demand notes _______________, issued as contributions to the
General Partner in connection with its status as a general partner of any other
entity that is to be treated, for income or franchise tax purposes as a
partnership formed pursuant to trust agreements substantially similar to this
Agreement shall be valued at an amount equal to the excess, if any, of (a) the
aggregate current amount of all such demand notes over (b) ___% of the aggregate
value of the Residual Interest Instruments, all Residual Interest Instruments
issued by such entities, as of such date of determination.
"Non-permitted Foreign Holder" shall have the meaning set forth in Section
3.10.
"Non-Transferable Residual Interest Instrument" shall mean an instrument
substantially in the form attached as Exhibit B.
"Non-U.S. Person" shall mean an individual, corporation, partnership or
other person other than a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, an estate that
is subject to U.S. federal income tax regardless of the source of its income, or
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
trustees have authority to control all substantial decisions of the trust.
"Owner Trust Estate" shall mean the contribution of $100 referred to in
Section 2.5 and the Collateral (as defined in the Indenture).
"Owner Trustee" shall mean [ ______________________ ], a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor owner trustee hereunder.
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"Paying Agent" shall mean the Co-Owner Trustee or any successor in interest
thereto or any other paying agent or co-paying agent appointed pursuant to
Section 3.9 and authorized by the Issuer to make payments to and distributions
from the Certificate Distribution Account, including payment of principal of or
interest on the Residual Interest Instruments on behalf of the Issuer.
"Percentage Interest" shall mean with respect to each Residual Interest
Instrument, the percentage portion of all of the Residual Interest evidenced
thereby as stated on the face of such Residual Interest Instrument.
"Prospective Certificateholder" shall have the meaning set forth in Section
3.10.
"Rating Agency Condition" means, with respect to any action to which a
Rating Agency Condition applies, that each Rating Agency shall have been given
10 days (or such shorter period as is acceptable to each Rating Agency) prior
notice thereof and that each of the Rating Agencies shall have notified the
Depositor, the Owner Trustee and the Co-Owner Trustee in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Notes and Residual Interest Instruments.
"Record Date" shall mean as to each Distribution Date the last Business Day
of the month immediately preceding the month in which such Distribution Date
occurs.
"Residual Interest" shall mean the right to receive distributions of Excess
Spread, if any, and certain other funds, if any, on each Distribution Date,
pursuant to Section 5.2 of the Sale and Servicing Agreement.
"Residual Interest Instrument" shall mean an instrument substantially in
the form attached as Exhibit A or Exhibit B hereto and evidencing the Residual
Interest.
"Residual Interestholders" shall mean any Holder of a Percentage Interest
of the Residual Interest. On the Closing Date, the Depositor will receive 1--%
Percentage Interest of the Residual Interest.
"Sale and Servicing Agreement" shall mean the Sale and Servicing Agreement
dated as of September 4, among the Trust, as Issuer, the Depositor, as Seller,
the Indenture Trustee, as Indenture Trustee and Co-Owner Trustee, and
______________________, as Servicer.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Transferrable Residual Interest Instrument" shall mean an instrument
substantially in the form attached as Exhibit A.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Underwriters" shall mean ____________________________.
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Section 1.2 Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Sale and Servicing Agreement or, if not defined
therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of
accounting terms in this Agreement or in any such certificate or other document
are inconsistent with the meanings of such terms under generally accepted
accounting principles, the definitions contained in this Agreement or in any
such certificate or other document shall control.
(d) The words "hereof', "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement; Section and Exhibit references
contained in this Agreement are references to Sections and Exhibits in or to
this Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein; references to a
Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION
Section 2.1 Name. The Trust created hereby shall be known as
"________________ Trust ______________", in which name the Owner Trustee may
conduct the business of the Trust, make and execute contracts and other
instruments on behalf of the Trust and xxx and be sued.
Section 2.2 Office. The office of the Trust shall be in care of the Owner
Trustee at the Corporate Trust Office or at such other address in Delaware as
the Owner Trustee may designate by written notice to the Certificateholders and
the Depositor.
Section 2.3 Purposes and Powers. (a) The purpose of the Trust is to engage
in the following activities:
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(i) to issue the Notes pursuant to the Indenture and to sell such
Notes;
(ii) with the proceeds of the sale of the Notes, to purchase the
Loans, to fund the Pre-Funding Account and the Capitalized Interest
Account, to pay the organizational, start-up and transactional expenses of
the Trust and to pay the balance to the Depositor;
(iii) to purchase, from time to time, from the Depositor with funds
deposited to the Pre-Funding Account, the Subsequent Loans;
(iv) to assign, grant, transfer, pledge, mortgage and convey the Owner
Trust Estate pursuant to the Indenture and to hold, manage and distribute
to the Certificateholders pursuant to the terms of the Sale and Servicing
Agreement any portion of the Owner Trust Estate released from the lien of,
and remitted to the Trust pursuant to, the Indenture;
(v) to enter into and perform its obligations under the Basic
Documents and all other documents connected therewith to which it is to be
a party;
(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith;
(vii) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation of
the Owner Trust Estate and the making of distributions to the
Certificateholders and the Noteholders; and
(viii) to issue the Residual Interest Instruments pursuant to this
Agreement.
The Trust is hereby authorized to engage in the foregoing activities. The
Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement
or the Basic Documents.
Section 2.4 Appointment of Owner Trustee. The Depositor hereby appoints the
Owner Trustee as trustee of the Trust effective as of the date hereof, to have
all the rights, powers and duties set forth herein.
Section 2.5 Initial Capital Contribution of Owner Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $100. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contributions, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor
shall pay organizational expenses of the Trust as they may arise or shall, upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee.
Section 2.6 Declaration of Trust. The Owner Trustee hereby declares that it
will hold the Owner Trust Estate in trust upon and subject to the conditions set
forth herein for the use and benefit of the Certificateholders, subject to the
obligations of the Trust under the Basic Documents. It is the intention of the
parties hereto that the Trust constitute a business trust under
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the Business Trust Statute and that this Agreement constitute the governing
instrument of such business trust. It is the intention of the parties hereto
that, solely for income and franchise tax purposes (i) so long as there is a
sole Certificateholder, the Trust shall be treated as a security arrangement,
with the assets of the Trust being the Loans and other assets held by the Trust,
the owner of the Loans being the sole Certificateholder and the Notes being
non-recourse debt of the sole Certificateholder, and (ii) if there is more than
one Certificateholder, the Trust shall be treated as a partnership for income
and franchise purposes, with the assets of the partnership being the Loans and
other assets held by the Trust, the partners of the partnership being the
holders of the Residual Interest Instruments and the Notes being non-recourse
debt of the partnership. The parties agree that, unless otherwise required by
appropriate tax authorities, the Trust will file or cause to be filed annual or
other necessary returns, reports and other forms consistent with the
characterization of the Trust as provided in the preceding sentence for such tax
purposes. Effective as of the date hereof, the Owner Trustee shall have all
rights, powers and duties set forth herein and in the Business Trust Statute
with respect to accomplishing the purposes of the Trust.
Section 2.7 Liability of the General Partner. (a) The General Partner shall
be liable directly to and will indemnify the injured party for all losses,
claims, damages, liabilities and expenses of the Issuer (including Expenses, to
the extent not paid out of the Trust Estate) to the extent that the General
Partner would be liable if the Issuer were a partnership under the Delaware
Revised Uniform Limited Partnership Act in which the General Partner were a
general partner; provided, however, that the General Partner shall not be liable
for any losses incurred by a Holder in the capacity of an investor in the
Residual Interest Instruments or a Noteholder in the capacity of an investor in
the Notes. In addition, any third party creditors of the Issuer (other than in
connection with the obligations described in the preceding sentence for which
the General Partner shall not be liable) shall be deemed third party
beneficiaries of this paragraph. The obligations of the General Partner under
this paragraph shall be evidenced by the Residual Interest Instruments described
in Section 3.2, which for purposes of the Business Trust Statute shall be deemed
to be a separate class of Residual Interest Instruments from all other Residual
Interest Instruments issued by the Issuer.
(b) No Certificateholder, other than to the extent set forth in clause (a),
shall have any personal liability or obligation to the Issuer.
Section 2.8 Title to Trust Property.
(a) Subject to the Indenture, legal title to all the Owner Trust Estate
shall be vested at all times in the Trust as a separate legal entity except
where applicable law in any jurisdiction requires title to any part of the Owner
Trust Estate to be vested in a trustee or trustees, in which case title shall be
deemed to be vested in the Owner Trustee, the Co-Owner Trustee and/or a separate
trustee, as the case may be.
(b) The Certificateholders shall not have legal title to any part of the
Owner Trust Estate. No transfer by operation of law or otherwise of any interest
of the Certificateholders shall operate to terminate this Agreement or the
trusts hereunder or entitle any transferee to an accounting or to the transfer
to it of any part of the Owner Trust Estate.
Section 2.9 Situs of Trust. The Trust will be located and administered in
the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
New York, except with respect to the Co-Owner Trustee. The Trust shall not have
any employees; provided, however, that nothing herein shall
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restrict or prohibit the Owner Trustee from having employees within or without
the State of Delaware. Payments will be received by the Trust only in Delaware
or New York, and payments will be made by the Trust only from Delaware or New
York, except with respect to the Co-Owner Trustee. The only office of the Trust
will be at the Corporate Trust Office in Delaware.
Section 2.10 Representations and Warranties of the Depositor; Covenant of
the Depositor.
(a) The Depositor hereby represents and warrants to the Owner Trustee and
the Co-Owner Trustee that:
(i) It is duly organized and validly existing as a corporation in good
standing under the laws of the State of Delaware, with power and authority
to own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted.
(ii) It is duly qualified to do business as a foreign corporation in
good standing, and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the conduct of
its business shall require such qualifications.
(iii) It has the power and authority to execute and deliver this
Agreement and to carry out its terms; and the execution, delivery and
performance of this Agreement have been duly authorized by it by all
necessary corporate action.
(iv) The consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time) a default under, its certificate
of incorporation or by-laws, or any material indenture, agreement or other
instrument to which it is a party or by which it is bound; nor result in
the creation or imposition of any lien upon any of its properties pursuant
to the terms of any such indenture, agreement or other instrument (other
than pursuant to the Basic Documents); nor violate any law or, to the best
of the its knowledge, any order, rule or regulation applicable to it of any
court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over it or its
properties.
(v) There are no proceedings or investigations pending or, to its best
knowledge, threatened, before any court, regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over it or
its properties: (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions contemplated
by this Agreement or (iii) seeking any determination or ruling that might
materially and adversely affect the performance by it of its obligations
under, or the validity or enforceability of, this Agreement.
(vi) The Depositor represents and warrants that it has been duly
capitalized so as to make its aggregate net worth at least equal to the
Minimum Net Worth.
(vii) If the Depositor is capitalized, in whole or in part by the
delivery of a demand note (a "Demand Note") from ______________, the
proceeds of such Demand Note will not be used to pay (i) any of the
expenses of _______________ in connection with the transactions
contemplated by the Basic Documents or (ii) the purchase price for the
Residual Interest Instruments purchased pursuant to Section 3.2. Such
Demand Note shall be enforceable
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against ______________, subject to its terms, and subject to applicable
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization
and similar laws now or hereafter in effect relating to creditors' rights
generally subject to general principles of equity (whether applied in a
proceeding at law or in equity). Such Demand Note may be retired, forgiven,
or otherwise cancelled or disposed of, subject to its terms, provided that
the Depositor shall deliver to the Owner Trustee and the Indenture Trustee
an Opinion of Counsel to the effect that such cancellation shall not cause
the Issuer to be an association taxable as a corporation or a publicly
traded partnership for California Franchise Tax purposes.
(b) The Depositor covenants with the Owner Trustee and the Co-Owner Trustee
that during the continuance of this Agreement it will comply in all respects
with the provisions of its certificate of incorporation in effect from time to
time.
Section 2.11 Federal Income Tax Allocations. Net income (or loss) of the
Issuer for any month as determined for federal income tax purposes (and each
item of income, gain, loss, credit and deduction entering into the computation
thereof) shall be allocated among the Certificateholders as of the first Record
Date following the end of such month, in proportion to their Percentage Interest
ownership of Residual Interest Instruments on such date.
Section 2.12 Covenants of the General Partner. The General Partner agrees
and covenants for the benefit of each Certificateholder and the Owner Trustee,
during the term of this Agreement, and to the fullest extent permitted by
applicable law, that:
(a) it shall not assign, sell, convey, pledge, transfer, reconvey,
cancel, forgive, compromise or otherwise dispose of any Demand Note held by
it, in whole or in part;
(b) it shall not sell, assign, transfer, give or encumber, by
operation of law or otherwise, in whole or in part, the interest evidenced
by its Residual Interest Instrument acquired pursuant to Section 3.2;
(c) it shall not create, incur or suffer to exist any indebtedness or
engage in any business, except, in each case, as permitted by its
certificate of incorporation and the Basic Documents;
(d) it shall not, for any reason, institute proceedings for the Issuer
to be adjudicated a bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against the Issuer, or file a petition
seeking or consenting to reorganization or relief under any applicable
federal or state law relating to the bankruptcy of the Issuer, or consent
to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Issuer or a substantial
part of the property of the Issuer or cause or permit the Issuer to make
any assignment for the benefit of creditors, or admit in writing the
inability of the Issuer to pay its debts generally as they become due, or
declare or effect a moratorium on the debt of the Issuer or take any action
in furtherance of any such action;
(e) it shall obtain from each counterparty to each Basic Document to
which it or the Issuer is a party and each other agreement entered into on
or after the date hereof to which it or the Issuer is a party, an agreement
by each such counterparty that prior to the occurrence of the event
specified in Section 9.1(f) such counterparty shall not institute against,
or join any other Person in instituting against, it or the Issuer, any
bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceedings under the laws of the United
States or any state of the United States;
9
(f) it shall not, for any reason, withdraw or attempt to withdraw from
this Agreement, dissolve, institute proceedings for it to be adjudicated a
bankrupt or insolvent, or consent to the institution of bankruptcy or
insolvency proceedings against it, or file a petition seeking or consenting
to reorganization or relief under any applicable federal or state law
relating to bankruptcy, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of
it or a substantial part of its property, or make any assignment for the
benefit of creditors, or admit in writing its inability to pay its debts
generally as they become due, or declare or effect a moratorium on its debt
or take any action in furtherance of any such action; and
(g) it shall not make any distribution other than to the Issuer or
unless the aggregate net worth of the General Partner following such
distribution shall be at least equal to the Minimum Net Worth unless the
General Partner shall deliver to the Owner Trustee and the Indenture
Trustee an Opinion of Counsel to the effect that the failure to maintain
such Minimum Net Worth shall not cause the Issuer to be an association
taxable as a corporation or a publicly traded partnership for California
Franchise Tax purposes.
Section 2.13 Covenants of the Certificateholders. Each Holder agrees by its
acceptance of a Residual Interest Instrument:
(a) to be bound by the terms and conditions of the Residual Interest
Instruments of which such Certificateholder is the owner and of this
Agreement, including any supplements or amendments hereto and to perform
the obligations of an Certificateholder as set forth therein or herein, in
all respects as if it were a signatory hereto. This undertaking is made for
the benefit of the Issuer, the Owner Trustee, and all other
Certificateholders present and future;
(b) to hereby appoint the General Partner as such Certificateholder's
agent and attorney-in-fact to sign any federal income tax information
return filed on behalf of the Issuer and agree that, if requested by the
Issuer, it will sign such federal income tax information return in its
capacity as holder of an interest in the Issuer. Each Certificateholder
also hereby agrees that in its tax returns it will not take any position
inconsistent with those taken in any tax returns filed by the Issuer;
(c) if such Certificateholder is other than an individual or other
entity holding its Residual Interest Instrument through a broker who
reports securities sales on Form 1099-B, to notify the Owner Trustee of any
transfer by it of a Residual Interest Instrument in a taxable sale or
exchange, within 30 days of the date of the transfer, and
(d) until the completion of the events specified in Section 9.1(f),
not to, for any reason, institute proceedings for the Issuer or the General
Partner to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Issuer, or
file a petition seeking or consenting to reorganization or relief under any
applicable federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Issuer or a substantial part of its
property, or cause or permit the Issuer to make any assignment for the
benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or declare or effect a moratorium on
its debt or take any action in furtherance of any such action.
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ARTICLE III
RESIDUAL INTEREST INSTRUMENTS AND TRANSFER OF INTERESTS
Section 3.1 Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Residual Interest Instruments, the Depositor shall be the sole owner of the
Trust.
Section 3.2 The Residual Interest Instruments. The Residual Interest
Instruments shall not be issued with a principal amount. The Residual Interest
Instruments shall be executed on behalf of the Trust by manual or facsimile
signature of a Trust Officer of the Owner Trustee or the Co-Owner Trustee.
Residual Interest Instruments bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be valid and binding
obligations of the Trust, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Residual Interest Instruments or did not hold such offices at the date
of authentication and delivery of such Residual Interest Instruments.
A transferee of a Residual Interest Instrument shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder and under the Sale and Servicing
Agreement, upon such transferee's acceptance of a Residual Interest Instrument
duly registered in such transferee's name pursuant to Section 3.4.
Section 3.3 Execution, Authentication and Delivery of Residual Interest
Instruments. Concurrently with the initial sale of the Loans to the Issuer
pursuant to the Sale and Servicing Agreement, the Owner Trustee or Co-Owner
Trustee shall cause the Residual Interest Instruments representing 100% of the
Percentage Interests of the Residual Interest to be executed on behalf of the
Issuer, authenticated and delivered to or upon the written order of the
Depositor, signed by its chairman of the board, its president or any vice
president, without further corporate action by the Depositor, in authorized
denominations. No Residual Interest Instrument shall entitle its holder to any
benefit under this Agreement, or shall be valid for any purpose, unless there
shall appear on such Residual Interest Instrument a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee or the Administrator, as the Owner Trustee's authenticating agent,
by manual or facsimile signature; such authentication shall constitute
conclusive evidence that such Residual Interest Instrument shall have been duly
authenticated and delivered hereunder. All Residual Interest Instruments shall
be dated the date of their authentication.
Section 3.4 Registration of Transfer and Exchange of Residual Interest
Instruments. The Certificate Registrar shall keep or cause to be kept, at the
office or agency maintained pursuant to Section 3.8, a Certificate Register in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Residual Interest Instruments and
of transfers and exchanges of Residual Interest Instruments as herein provided,
[______________________] shall be the initial Certificate Registrar.
The Depositor shall provide the Indenture Trustee with a list of the names
and addresses of the Certificateholders on the Closing Date in such form as
shall be delivered to the Certificate Registrar by the Depositor. Upon any
transfers of Residual Interest Instruments, the Certificate Registrar shall
notify the Indenture Trustee of the name and address of the transferee in
writing, by facsimile.
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Upon surrender for registration of transfer of any Residual Interest
Instrument at the office or agency maintained pursuant to Section 3.8, the Owner
Trustee shall execute, authenticate and deliver (or shall cause its
authenticating agent to authenticate and deliver), in the name of the designated
transferee or transferees, one or more new Residual Interest Instruments in
authorized denominations and of a like aggregate amount dated the date of
authentication by the Owner Trustee or any authenticating agent. At the option
of a Holder, Residual Interest Instruments may be exchanged for other Residual
Interest Instruments of the same class in authorized denominations of a like
aggregate amount upon surrender of the Residual Interest Instruments to be
exchanged at the office or agency maintained pursuant to Section 3.8.
Every Residual Interest Instrument presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Certificateholder or his attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate Registrar,
which requirements include membership or participation in the Securities
Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Certificate Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Exchange Act. Each Residual
Interest Instrument surrendered for registration of transfer or exchange shall
be canceled and subsequently disposed of by the Owner Trustee in accordance with
its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Residual Interest Instruments, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Residual Interest Instruments.
Notwithstanding the preceding provisions of this Section 3.4, the Owner
Trustee shall not be required to make, and the Certificate Registrar shall not
be required to register, transfers or exchanges of Residual Interest Instruments
for a period of 15 days preceding the due date for any payment with respect to
the Residual Interest Instrument.
Section 3.5 Mutilated, Destroyed, Lost or Stolen Residual Interest
Instruments. If (a) any mutilated Residual Interest Instrument shall be
surrendered to the Certificate Registrar, or if the Certificate Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Residual Interest Instrument and (b) there shall be delivered to the Certificate
Registrar and the Owner Trustee such security or indemnity as may be required by
them to save each of them harmless, then in the absence of notice that such
Residual Interest Instrument shall have been acquired by a bona fide purchaser,
the Owner Trustee or Co-Owner Trustee on behalf of the Trust shall execute and
the Owner Trustee, or the Administrator as the Owner Trustee's authenticating
agent, shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Residual Interest Instrument, a new
Residual Interest Instrument of like tenor and denomination. In connection with
the issuance of any new Residual Interest Instrument under this Section 3.5, the
Owner Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Residual Interest Instrument issued pursuant
to this Section 3.5 shall constitute conclusive evidence of ownership in the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Residual Interest Instrument shall be found at any time.
Section 3.6 Persons Deemed Certificateholders. Prior to due presentation of
a Residual Interest Instrument for registration of transfer, the Owner Trustee
or the Certificate Registrar may treat the Person in whose name any Residual
Interest Instrument shall be registered
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in the Certificate Register as the owner of such Residual Interest Instrument
for the purpose of receiving distributions pursuant to Section 5.3 and for all
other purposes whatsoever, and neither the Owner Trustee nor the Certificate
Registrar shall be bound by any notice to the contrary.
Section 3.7 Access to List of Certificateholders' Names and Addresses. The
Owner Trustee shall furnish or cause to be furnished to the Servicer, the
Depositor and the Indenture Trustee, within 15 days after receipt by the Owner
Trustee of a request therefor from the Servicer, the Depositor or the Indenture
Trustee in writing, a list, in such form as the Servicer, the Depositor or the
Indenture Trustee may reasonably require, of the names and addresses of the
Certificateholders as of the most recent Record Date. Each Certificateholder, by
receiving and holding a Residual Interest Instrument, shall be deemed to have
agreed not to hold any of the Depositor, the Certificate Registrar or the Owner
Trustee accountable by reason of the disclosure of its name and address,
regardless of the source from which such information was derived.
Section 3.8 Maintenance of Office or Agency. The Owner Trustee shall
maintain an office or offices or agency or agencies where Residual Interest
Instruments may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Owner Trustee in respect of the
Residual Interest Instruments and the Basic Documents may be served. The Owner
Trustee initially designates the Administrator's office in Minneapolis,
Minnesota as its principal corporate trust office for such purposes. The Owner
Trustee shall give prompt written notice to the Depositor and to the Residual
Interestholders of any change in the location of the Certificate Register or any
such office or agency.
Section 3.9 Appointment of Paying Agent. The Owner Trustee hereby appoints
the Co-Owner Trustee as Paying Agent under this Agreement. The Paying Agent
shall make distributions to Residual Interestholders from the Certificate
Distribution Account pursuant to Section 5.3 hereof and Section 5.1 of the Sale
and Servicing Agreement and shall report the amounts of such distributions to
the Owner Trustee. The Paying Agent shall have the revocable power to withdraw
funds from the Certificate Distribution Account for the purpose of making the
distributions referred to above. In the event that the Co-Owner Trustee shall no
longer be the Paying Agent hereunder, the Owner Trustee shall appoint a
successor to act as Paying Agent (which shall be a bank or trust company). The
Owner Trustee shall cause such successor Paying Agent or any additional Paying
Agent appointed by the Owner Trustee to execute and deliver to the Owner Trustee
an instrument in which such successor Paying Agent or additional Paying Agent
shall agree with the Owner Trustee that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held by it for
payment to the Owners in trust for the benefit of the Residual Interestholders
entitled thereto until such sums shall be paid to such Certificateholders. The
Paying Agent shall return all unclaimed funds to the Owner Trustee, and upon
removal of a Paying Agent, such Paying Agent shall also return all funds in its
possession to the Owner Trustee. The provisions of Section 7.1, Section 7.3,
Section 7.4 and Section 8.1 shall apply to the Co-Owner Trustee also in its role
as Paying Agent, for so long as the Co-Owner Trustee shall act as Paying Agent
and, to the extent applicable, to any other paying agent appointed hereunder.
Any reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise. Notwithstanding anything herein to
the contrary, the Co-Owner Trustee and the Paying Agent shall be the same entity
as the Indenture Trustee under the Indenture and the Sale and Servicing
Agreement. If the Co-Owner Trustee and the Paying Agent cease to be the same
entity as the Indenture Trustee under the Indenture and the Sale and Servicing
Agreement, the Co-Owner Trustee and the Paying Agent shall resign and the Owner
Trustee shall assume the duties and obligations of the Co-Owner Trustee and the
Paying Agent hereunder and under the Sale and Servicing Agreement.
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Section 3.10 Restrictions on Transfer of Residual Interest Instruments.
(a) Disposition by the General Partner. On the Closing Date, the Depositor,
as General Partner, shall purchase for adequate consideration and retain
beneficial and record ownership of Residual Interest Instruments representing at
least 1% of the initial Certificate Balance, which Residual Interest Instruments
shall be issued in definitive form. Any attempted transfer of any Residual
Interest Instrument that would reduce such interest by the General Partner shall
be void; provided, however, that such Residual Interest Instrument may be
transferred to a successor General Partner pursuant to Section 9.2. The Owner
Trustee shall cause any Residual Interest Instrument issued to the General
Partner to contain a legend stating "THIS Residual Interest Instrument IS NOT
TRANSFERRABLE, EXCEPT UNDER THE LIMITED CONDITIONS SPECIFIED IN THE TRUST
AGREEMENT". The Residual Interest Instrument issued to the Depositor shall be
non-transferrable and shall bear a legend to such effect.
(b) Each prospective purchaser and any subsequent transferee of a Residual
Interest Instrument (each, a "Prospective Certificateholder"), other than the
Depositor, shall represent and warrant, in writing, to the Owner Trustee and the
Certificate Registrar and any of their respective successors that:
(i) Such Person is (A) a "qualified institutional buyer" as defined in
Rule 144A under the Securities Act of 1933, as amended (the "Securities
Act"), and is (x) aware that the seller of the Residual Interest Instrument
may be relying on the exemption from the registration requirements of the
Securities Act provided by Rule 144A and (y) acquiring such Residual
Interest Instrument for its own account or for the account of one or more
qualified institutional buyers for which it is authorized to act, or (B) a
Person involved in the organization or operation of the Trust or an
affiliate of such Person within the meaning of Rule 3a-7 of the Investment
Company Act of 1940, as amended (including, but not limited to, the
Depositor).
(ii) Such Person understands that the Residual Interest Instruments
have not been and will not be registered under the Securities Act and may
be offered, sold, pledged or otherwise transferred only to a Person whom
the seller reasonably believes is (A) a qualified institutional buyer or
(B) a Person involved in the organization or operation of the Trust or an
affiliate of such Person, in a transaction meeting the requirements of Rule
144A under the Securities Act and in accordance with any applicable
securities laws of any state of the United States.
(iii) Such Person understands that the Residual Interest Instruments
bear a legend to the following effect:
"THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS RESIDUAL INTEREST
INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL
INTEREST MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF
(INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A AND OF SUCH
LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST OR
AN AFFILIATE OF SUCH A PERSON WITHIN THE
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MEANING OF RULE 3a-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED
(INCLUDING, BUT NOT LIMITED TO, HOME EQUITY SECURITIZATION CORP.) IN A
TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH
LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS RESIDUAL INTEREST UNDER THE ACT OR
ANY STATE SECURITIES LAWS."
(c) Each Prospective Certificateholder, other than the Depositor, shall
represent and warrant, in writing, to the Owner Trustee and the Certificate
Registrar and any of their respective successors that the Prospective
Certificateholder is not (i) an "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is subject to the provisions of Title I of ERISA, (ii) a "plan"
within the meaning of Section 4975(e)(1) of the Code that is subject to Section
4975 of the Code or (iii) any entity, including an insurance company separate
account or general account, whose underlying assets are deemed to include assets
of a plan described in (i) or (ii) above by reason of such plan's investment in
the entity.
(d) By its acceptance of a Residual Interest Instrument, each Prospective
Certificateholder agrees and acknowledges that no legal or beneficial interest
in all or any portion of the Residual Interest Instruments may be transferred
directly or indirectly to an individual, corporation, partnership or other
person unless such transferee is not a Non-U.S. Person (any such person being
referred to herein as a "Non-permitted Foreign Holder"), and any such purported
transfer shall be void and have no effect.
(e) The Owner Trustee or the Co-Owner Trustee shall not execute, and shall
not countersign and deliver, a Residual Interest Instrument in connection with
any transfer thereof unless the transferor shall have provided to the Owner
Trustee and the Certificate Registrar a certificate signed by the transferee, a
Book-Entry Nominee or a Non-permitted Foreign Holder, which certificate shall
contain the consent of the transferee to any amendments of this Agreement as may
be required to effectuate further the foregoing restrictions on transfer of the
Residual Interest Instruments to Book-Entry Nominees or Non-permitted Foreign
Holders, and an agreement by the transferee that it will not transfer a Residual
Interest Instrument without providing to the Owner Trustee and the Certificate
Registrar a substantially identical certificate signed by the Prospective
Certificateholder to whom the Residual Interest Instrument is to be transferred.
(f) The Residual Interest Instruments shall bear an additional legend
referring to the foregoing restrictions contained in paragraphs (c), (d) and (e)
above.
(g) The Prospective Certificateholder shall obtain an opinion of counsel to
the effect that, as a matter of federal income tax law, such Prospective
Certificateholder is permitted to accept the transfer of a Residual Interest
Instrument.
Section 3.11 Securities Matters. Notwithstanding anything contained herein
to the contrary, neither the Owner Trustee nor the Certificate Registrar shall
be responsible for ascertaining whether any transfer complies with the
registration provisions or exemptions from the Securities Act of 1933, as
amended, the Securities Act of 1934, as amended, applicable state securities law
or the Investment Company Act of 1934, as amended, applicable state securities
law or the Investment Company Act; provided, however, that if a certificate is
specifically required to be delivered to the Owner Trustee by a purchaser or
transferee of a Residual Interest
15
Instrument, the Owner Trustee shall be under a duty to examine the same to
determine whether it conforms to the requirements of this Trust Agreement and
shall promptly notify the party delivering the same if such certificate does not
so conform.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.1 Prior Notice to Certificateholders with Respect to Certain
Matters. With respect to the following matters, the Owner Trustee shall not take
action, and the Certificateholders shall not direct the Owner Trustee to take
any action, unless at least 30 days before the taking of such action, the Owner
Trustee shall have notified the Certificateholders in writing of the proposed
action and the Certificateholders shall not have notified the Owner Trustee in
writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or the Certificateholders have provided
alternative direction:
(a) the initiation of any claim or lawsuit by the Trust (except claims
or lawsuits brought in connection with the collection of the Loans) and the
compromise of any action, claim or lawsuit brought by or against the Trust
(except with respect to the aforementioned claims or lawsuits for
collection of the Loans);
(b) the election by the Trust to file an amendment to the Certificate
of Trust (unless such amendment is required to be filed under the Business
Trust Statute);
(c) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Noteholder is required;
(d) the amendment or other change to this Agreement or any Basic
Document in circumstances where the consent of any Noteholder is not
required and such amendment materially adversely affects the interest of
the Certificateholders;
(e) the appointment pursuant to the Indenture of a successor Note
Registrar, Paying Agent or Indenture Trustee or pursuant to this Agreement
of a successor Certificate Registrar, or the consent to the assignment by
the Note Registrar, Paying Agent or Indenture Trustee or Certificate
Registrar of its obligations under the Indenture or this Agreement, as
applicable;
(f) the consent to the calling or waiver of any default of any Basic
Document,
(g) the consent to the assignment by the Indenture Trustee or Servicer
of their respective obligations under any Basic Document;
(h) except as provided in Article IX hereof, dissolve, terminate or
liquidate the Trust in whole or in part;
(i) merge or consolidate the Trust with or into any other entity, or
convey or transfer all or substantially all of the Trust's assets to any
other entity;
16
(j) cause the Trust to incur, assume or guaranty any indebtedness
other than as set forth in this Agreement;
(k) do any act that conflicts with any other Basic Document;
(1) do any act which would make it impossible to carry on the ordinary
business of the Trust;
(m) confess a judgment against the Trust;
(n) possess Trust assets, or assign the Trust's right to property, for
other than a Trust purpose;
(o) cause the Trust to lend any funds to any entity; or
(p) change the Trust's purpose and powers from those set forth in this
Trust Agreement.
In addition, the Trust shall not commingle its assets with those of any
other entity. The Trust shall maintain its financial and accounting books and
records separate from those of any other entity. Except as expressly set forth
herein, the Trust shall pay its indebtedness, operating expenses from its own
funds, and the Trust shall not pay the indebtedness, operating expenses and
liabilities of any other entity. The Trust shall maintain appropriate minutes or
other records of all appropriate actions and shall maintain its office separate
from the offices of the Depositor, and any of its affiliates.
The Owner Trustee shall not have the power, except upon the direction of
the Certificateholders, and to the extent otherwise consistent with the Basic
Documents, to (i) remove or replace the Servicer or the Indenture Trustee, (ii)
institute proceedings to have the Trust declared or adjudicated a bankrupt or
insolvent, (iii) consent to the institution of bankruptcy or insolvency
proceedings against the Trust, (iv) file a petition or consent to a petition
seeking reorganization or relief on behalf of the Trust under any applicable
federal or state law relating to bankruptcy, (v) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or any similar official)
of the Trust or a substantial portion of the property of the Trust, (vi) make
any assignment for the benefit of the Trust's creditors, (vii) cause the Trust
to admit in writing its inability to pay its debts generally as they become due,
(viii) take any action, or cause the Trust to take any action, in furtherance of
any of the foregoing (any of the above, a "Bankruptcy Action"). So long as the
Indenture remains in effect, no Certificateholder shall have the power to take,
and shall not take, any Bankruptcy Action with respect to the Trust or the
Depositor or direct the Owner Trustee to take any Bankruptcy Action with respect
to the Trust or the Depositor.
Section 4.2 Action by Certificateholders with Respect to Certain Matters.
[The Owner Trustee shall not have the power, except upon the direction of the
Certificateholders, to (a) remove the Administrator under the Administration
Agreement pursuant to Section 9 thereof, (b) appoint a successor Administrator
pursuant to Section 9 of the Administration Agreement, (c) remove the Servicer
under the Sale and Servicing Agreement pursuant to Section 10.1 thereof or (d)
sell the Loans after the termination of the Indenture. The Owner Trustee shall
take the actions referred to in the preceding sentence only upon written
instructions signed by the Certificateholders.]
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Section 4.3 Action by Certificateholders with Respect to Bankruptcy. The
Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust without the unanimous prior approval of all
Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder certifying that such Certificateholder reasonably believes
that the Trust is insolvent.
Section 4.4 Restrictions on Certificateholders' Power. The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
Section 4.5 Majoritv Control. Except as expressly provided herein, any
action that may be taken by the Certificateholders under this Agreement may be
taken by the Majority Residual Interestholders. Except as expressly provided
herein, any written notice of the Certificateholders delivered pursuant to this
Agreement shall be effective if signed by the Majority Residual Interestholders
at the time of the delivery of such notice.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.1 Establishment of Trust Account. The Owner Trustee shall cause
the Servicer, for the benefit of the Certificateholders, to establish and
maintain with __________________________ for the benefit of the Owner Trustee or
Co-Owner Trustee one or more Eligible Accounts which so long as the Co-Owner
Trustee holds such Trust Account shall be entitled "Certificate Distribution
Account, ___________________________ as Indenture Trustee, in trust for the
_______________ Trust, Series ________". Funds shall be deposited in the
Certificate Distribution Account as required by the Sale and Servicing
Agreement.
All of the right, title and interest of the Co-Owner Trustee or Owner
Trustee in all funds on deposit from time to time in the Certificate
Distribution Account and in all proceeds thereof shall be held for the benefit
of the Certificateholders and such other persons entitled to distributions
therefrom. Except as otherwise expressly provided herein or in the Sale and
Servicing Agreement, the Certificate Distribution Account shall be under the
sole dominion and control of the Owner Trustee or Co-Owner Trustee for the
benefit of the Certificateholders and the Servicer.
In addition to the foregoing, the Certificate Distribution Account is a
Trust Account under the Sale and Servicing Agreement and constitutes part of the
Trust Estate pledged by the Trust to the Indenture Trustee under the Indenture.
The Certificate Distribution Account shall be subject to and established and
maintained in accordance with the applicable provisions of the Sale and
Servicing Agreement and the Indenture, including, without limitation, the
provisions of Section 5.1(e) of the Sale and Servicing Agreement regarding
distributions from the Certificate Distribution Account.
Section 5.2 Application Of Trust Funds.
(a) On each Distribution Date, the Owner Trustee or Co-Owner Trustee shall
direct the Paying Agent to distribute to the Servicer and the Residual
Interestholders from
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amounts on deposit in the Certificate Distribution Account the distributions as
provided in Section 5.2(b) of the Sale and Servicing Agreement with respect to
such Distribution Date.
(b) On each Distribution Date, the Owner Trustee shall cause the Paying
Agent to send to each Residual Interestholder the statement provided to the
Owner Trustee by the Servicer pursuant to Section 6.1 of the Sale and Servicing
Agreement with respect to such Distribution Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to a Certificateholder, such tax shall reduce the
amount otherwise distributable to the Certificateholder in accordance with this
Section 5.2. Each of the Owner Trustee and the Paying Agent is hereby authorized
and directed to retain from amounts otherwise distributable to the
Certificateholders sufficient funds for the payment of any tax that is legally
owed by the Trust (but such authorization shall not prevent the Owner Trustee
from contesting any such tax in appropriate proceedings, and withholding payment
of such tax, if permitted by law, pending the outcome of such proceedings). The
amount of any withholding tax imposed with respect to a Certificateholder shall
be treated as cash distributed to such Certificateholder at the time it is
withheld by the Trust and remitted to the appropriate taxing authority. If there
is a possibility that withholding tax is payable with respect to a distribution
(such as a distribution to a non-U.S. Certificateholder), the Owner Trustee or
the Paying Agent may in its sole discretion withhold such amounts in accordance
with this paragraph (c). In the event that a Certificateholder wishes to apply
for a refund of any such withholding tax, the Owner Trustee shall reasonably
cooperate with such owner in making such claim so long as such Certificateholder
agrees to reimburse the Owner Trustee for any out-of-pocket expenses incurred.
Section 5.3 Method of Payment. Subject to Section 3.9, distributions
required to be made to Certificateholders on any Distribution Date shall be made
to each Certificateholder of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Holder at a
bank or other entity having appropriate facilities therefor, if such
Certificateholder shall have provided to the Certificate Registrar appropriate
written instructions at least five Business Days prior to such Distribution Date
and such Holder's Certificates in the aggregate evidence a denomination of not
less than $1,000,000; or, if not, by check mailed to such Certificateholder at
the address of such holder appearing in the Certificate Register; provided,
however, that the initial Residual Interestholder shall receive all payments by
wire transfer, in immediately available funds.
Section 5.4 Segregation of Moneys: No Interest. Subject to Section 4.1 and
Section 5.2, moneys received by the Owner Trustee hereunder and deposited into
the Certificate Distribution Account will be segregated except to the extent
required otherwise by law or the Sale and Servicing Agreement and shall be
invested in Permitted Investments at the direction of the Servicer. The Owner
Trustee shall not be liable for payment of any interest in respect of such
moneys.
Section 5.5 Accounting and Reports to the Certificateholders, the Internal
Revenue Service and Others. The Owner Trustee shall deliver to each
Certificateholder such information, reports or statements as may be required by
the Code and applicable Treasury Regulations and as may be required to enable
each Certificateholder to prepare its federal and state income tax returns.
Consistent with the Trust's characterization for tax purposes, as a security
arrangement for the issuance of non-recourse debt, no federal income tax return
shall be filed on behalf of the Trust unless either (i) the Owner Trustee shall
receive an Opinion of Counsel that, based on a change in applicable law
occurring after the date hereof, or as a result of a transfer by the
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Depositor permitted by Section 3.4, the Code requires such a filing or (ii) the
Internal Revenue Service shall determine that the Trust is required to file such
a return. Notwithstanding the preceding sentence, the Owner Trustee shall file
Internal Revenue Service Form 8832 and elect for the Trust to be treated as a
domestic eligible entity with a single owner that is disregarded as a separate
entity, which election shall remain in effect so long as the Depositor or any
other party is the sole Certificateholder. In the event that the Trust is
required to file tax returns, the Owner Trustee shall prepare or shall cause to
be prepared any tax returns required to be filed by the Trust and shall remit
such returns to the Depositor (or if the Depositor no longer owns any Residual
Interest Instruments, the Certificateholder designated for such purpose by the
Depositor to the Owner Trustee in writing) at least five (5) days before such
returns are due to be filed. The Depositor (or such designee Owner, as
applicable) shall promptly sign such returns and deliver such returns after
signature to the Owner Trustee and such returns shall be filed by the Owner
Trustee with the appropriate tax authorities. In no event shall the Owner
Trustee or the Depositor (or such designee Certificateholder, as applicable) be
liable for any liabilities, costs or expenses of the Trust or the Noteholders
arising out of the application of any tax law, including federal, state, foreign
or local income or excise taxes or any other tax imposed on or measured by
income (or any interest, penalty or addition with respect thereto or arising
from a failure to comply therewith) except for any such liability, cost or
expense attributable to any act or omission by the Owner Trustee or the
Depositor (or such designee Certificateholder, as applicable), as the case may
be, in breach of its obligations under this Agreement. The Owner Trustee shall
sign all tax information returns prepared and filed pursuant to this Section 5.5
and any other returns as may be required by law, and in doing so shall rely
entirely upon, and shall have no liability for information provided by,
documents prepared by or calculations provided by, the General Partner, as the
case may be. The Owner Trustee shall elect under Section 1278 of the Code to
include in income currently any market discount that accrues with respect to the
Loans. The Owner Trustee shall not make the election provided under Section 754
of the Code.
Section 5.6 Signature on Returns: Tax Matters Partner.
(a) Notwithstanding the provisions of Section 5.5, the Owner Trustee shall
sign on behalf of the Issuer the tax returns of the Issuer, unless applicable
law requires a Certificateholder to sign such documents, in which case such
documents shall be signed by the General Partner.
(b) The General Partner shall be the "tax matters partner" of the Issuer
pursuant to the Code.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.1 General Authority. The Owner Trustee is authorized and directed
to execute and deliver or cause to be executed and delivered the Notes, the
Residual Interest Instruments and the Basic Documents to which the Trust is to
be a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is to be a party and any
amendment or other agreement or instrument described in Article III, in each
case, in such form as the Depositor shall approve, as evidenced conclusively by
the Owner Trustee's execution thereof, and, on behalf of the Trust, to direct
the Indenture Trustee to authenticate and deliver Classes of Securities in the
following aggregate principal amounts: Class A-1 Notes, $_______; Class A-2
Notes, $________; Class A-3 Notes, $_________; Class A-4 Notes, $________; Class
M-1 Notes, $________; Class M-2
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Notes, $_____; and Class B Notes, $_______. In addition to the foregoing, the
Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Trust, pursuant to the Basic Documents. The General Partner may
execute any other closing certificates or receipts on behalf of the Issuer.
Section 6.2 General Duties. It shall be the duty of the Owner Trustee:
(a) to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and the Basic Documents to which the
Trust is a party and to administer the Trust in the interest of the
Certificateholders, subject to the Basic Documents and in accordance with the
provisions of this Agreement. Notwithstanding the foregoing, the Owner Trustee
shall be deemed to have discharged its duties and responsibilities hereunder and
under the Basic Documents to the extent the Administrator or the Co-Owner
Trustee has agreed in the Administration Agreement or this Agreement,
respectively, to perform any act or to discharge any duty of the Owner Trustee
or the Trust hereunder or under any Basic Document, and the Owner Trustee shall
not be held liable for the default or failure of the Administrator, the General
Partner or the Co-Owner Trustee to carry out its obligations under the
Administration Agreement or this Agreement, respectively; and
(b) to obtain and preserve the Issuer's qualification to do business in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of the Indenture, the Notes, the
Collateral and each other instrument and agreement included in the Trust Estate.
Section 6.3 Action upon Instruction.
(a) Subject to Article IV and in accordance with the terms of the Basic
Documents, the Certificateholders may by written instruction direct the Owner
Trustee in the management of the Trust but only to the extent consistent with
the limited purpose of the Trust. Such direction may be exercised at any-time by
written instruction of the Certificateholders pursuant to Article IV.
(b) The Owner Trustee shall not be required to take any action hereunder or
under any Basic Document if the Owner Trustee shall have reasonably determined,
or shall have been advised by counsel, that such action is likely to result in
liability on the part of the Owner Trustee or is contrary to the terms hereof or
of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or under
any Basic Document, the Owner Trustee shall promptly give notice (in such form
as shall be appropriate under the circumstances) to the Certificateholders
requesting instruction from the Certificateholders as to the course of action to
be adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Certificateholders received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within 10 days of
such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
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(d) In the event that the Owner Trustee is unsure as to the application of
any provision of this Agreement or any Basic Document or any such provision is
ambiguous as to its application, or is, or appears to be, in conflict with any
other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Certificateholders
requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain
from taking such action, not inconsistent with this Agreement or the Basic
Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
Section 6.4 No Duties Except as Specified in this Agreement, the Basic
Documents or in Instructions. The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take
or refrain from taking any action under, or in connection with, any document
contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement, any Basic Document or in any document
or written instruction received by the Owner Trustee pursuant to Section 6.3;
and no implied duties or obligations shall be read into this Agreement or any
Basic Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare or file any
Securities and Exchange Commission filing for the Trust or to record this
Agreement or any Basic Document. The Owner Trustee nevertheless agrees that it
will, at its own cost and expense, promptly take all action as may be necessary
to discharge any liens on any part of the Owner Trust Estate that result from
actions by, or claims against, the Owner Trustee in its individual capacity that
are not related to the ownership or the administration of the Owner Trust
Estate.
Section 6.5 No Action Except Under Specified Documents or Instructions. The
Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal
with any part of the Owner Trust Estate except (i) in accordance with the powers
granted to and the authority conferred upon the Owner Trustee pursuant to this
Agreement, (ii) in accordance with the Basic Documents and (iii) in accordance
with any document or instruction delivered to the Owner Trustee pursuant to
Section 6.3.
Section 6.6 Restrictions. The Owner Trustee shall not take any action (a)
that is inconsistent with the purposes of the Trust set forth in Section 2.3 or
(b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section 6.6.
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ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.1 Acceptance of Trusts and Duties. The Owner Trustee accepts the
trusts hereby created and agrees to perform its duties hereunder with respect to
such trusts but only upon the terms of this Agreement and the Basic Documents.
The Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the Basic
Documents and this Agreement. The Owner Trustee shall not be answerable or
accountable hereunder or under any Basic Document under any circumstances,
except (i) for its own willful misconduct or gross negligence or (ii) in the
case of the inaccuracy of any representation or warranty contained in Section
7.3 expressly made by the Owner Trustee in its individual capacity. In
particular, but not by way of limitation (and subject to the exceptions set
forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of judgment
made by a responsible officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the instructions of
the Administrator or the Certificateholders;
(c) no provision of this Agreement or any Basic Document shall require
the Owner Trustee to expend or risk funds or otherwise incur any financial
liability in the performance of any of its rights or powers hereunder or
under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents,
including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect of
the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or
in respect of the validity or sufficiency of the Basic Documents, other
than the certificate of authentication on the Residual Interest
Instruments, and the Owner Trustee shall in no event assume or incur any
liability, duty, or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in the
Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Administrator, the Seller, the Depositor, the Indenture
Trustee, the General Partner or the Servicer under any of the Basic
Documents or otherwise and the Owner Trustee shall have no obligation or
liability to perform the obligations of the Trust under this Agreement or
the Basic Documents that are required to be performed by the Administrator
under the Administration Agreement, the Indenture Trustee under the
Indenture or the Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation
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under this Agreement or otherwise or in relation to this Agreement or any Basic
Document, at the request, order or direction of any of the Certificateholders,
unless such Certificateholders have offered to the Owner Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
may be incurred by the Owner Trustee therein or thereby. The right of the Owner
Trustee to perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee shall not
be answerable for other than its gross negligence or willful misconduct in the
performance of any such act provided, that the Owner Trustee shall be liable for
its negligence or willful misconduct in the event that it assumes the duties and
obligations of the Co-Owner Trustee under the Sale and Servicing Agreement
pursuant to Section 10.5.
Section 7.2 Furnishing of Documents. The Owner Trustee shall furnish (a) to
the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents and (b) to Noteholders promptly upon written request
therefor, copies of the Sale and Servicing Agreement, the Administration
Agreement and the Trust Agreement.
Section 7.3 Representations and Warranties.
(a) The Owner Trustee hereby represents and warrants to the Depositor for
the benefit of the Certificateholders, that:
(i) It is a banking corporation duly organized and validly existing in
good standing under the laws of the State of North Carolina. It has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
(iii) Neither the execution nor the delivery by it of this Agreement
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene
any federal or North Carolina law, governmental rule or regulation
governing the banking or trust powers of the Owner Trustee or any judgment
or order binding on it, or constitute any default under its charter
documents or bylaws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound.
(b) The Co-Owner Trustee hereby represents and warrants to the Depositor
that:
(i) It is a national banking association duly organized and validly
existing in good standing under the laws of the United States. It has all
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(ii) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf.
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(iii) Neither the execution nor the delivery by it of this Agreement
nor the consummation by it of the transactions contemplated hereby nor
compliance by it with any of the terms or provisions hereof will contravene
any federal or ______________ law, governmental rule or regulation
governing the banking or trust powers of the Co-Owner Trustee or any
judgment or order binding on it, or constitute any default under its
charter documents or by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound.
Section 7.4 Reliance: Advice of Counsel.
(a) The Owner Trustee shall incur no liability to anyone in acting upon any
signature, instrument, notice, resolution, request, consent, order, certificate,
report, opinion, bond, or other document or paper believed by it to be genuine
and believed by it to be signed by the proper party or parties. The Owner
Trustee may accept a certified copy of a resolution of the board of directors or
other governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in the
performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and not contrary to this Agreement or
any Basic Document.
Section 7.5 Not Acting in Individual Capacity. Except as provided in this
Article VII, in accepting the trusts hereby created [_________________] acts
solely as Owner Trustee hereunder and not in its individual capacity and all
Persons having any claim against the Owner Trustee by reason of the transactions
contemplated by this Agreement or any Basic Document shall look only to the
Owner Trust Estate for payment or satisfaction thereof.
Section 7.6 Owner Trustee Not Liable for Residual Interest Instruments or
Loans. The recitals contained herein and in the Residual Interest Instruments
(other than the signature and countersignature of the Owner Trustee on the
Residual Interest Instruments) shall be taken as the statements of the
Depositor, and the Owner Trustee assumes no responsibility for the correctness
thereof. The Owner Trustee makes no representations as to the validity or
sufficiency of this Agreement, of any Basic Document or of the Residual Interest
Instruments (other than the signature and countersignature of the Owner Trustee
on the Residual Interest Instruments and as specified in Section 7.3) or the
Notes, or of any Loans or related documents. The Owner Trustee shall at no time
have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Loan, or the perfection and priority of any
security interest created by any Loan or the maintenance of any such perfection
and priority, or for or with respect to the sufficiency of the Owner Trust
Estate or its ability to generate the payments to be distributed to
25
Certificateholders under this Agreement or the Noteholders under the Indenture,
including, without limitation: the existence, condition and ownership of any
Mortgaged Property; the existence and enforceability of any insurance thereon;
the existence and contents of any Loan on any computer or other record thereof;
the validity of the assignment of any Loan to the Trust or of any intervening
assignment; the completeness of any Loan; the performance or enforcement of any
Loan; the compliance by the Depositor or the Servicer with any warranty or
representation made under any Basic Document or in any related document or the
accuracy of any such warranty or representation or any action of the
Administrator, the Indenture Trustee or the Servicer or any Subservicer taken in
the name of the Owner Trustee.
Section 7.7 Owner Trustee May Own Residual Interest Instruments and Notes.
The Owner Trustee in its individual or any other capacity may become the owner
or pledgee of Residual Interest Instruments or Notes and may deal with the
Depositor, the Administrator, the Indenture Trustee and the Servicer in banking
transactions with the same rights as it would have if it were not Owner Trustee.
Section 7.8 Licenses. The Owner Trustee shall with the advice of the
Servicer and upon the authorization of the Depositor cause the Trust to use its
best efforts to obtain and maintain the effectiveness of any licenses required
in connection with this Agreement and the Basic Documents and the transactions
contemplated hereby and thereby until such time as the Trust shall terminate in
accordance with the terms hereof.
Section 7.9 Rights of Co-Owner Trustee. The Co-Owner Trustee shall be
entitled to all the rights and benefits, but none of the liabilities, conferred
upon the Owner Trustee in Article VII.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE AND CO-OWNER TRUSTEE
Section 8.1 Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Servicer and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the
Servicer for its other reasonable expenses hereunder, including the reasonable
compensation, expenses and disbursements of such agents, representatives,
experts and counsel as the Owner Trustee may employ in connection with the
exercise and performance of its rights and its duties hereunder. The Co-Owner
Trustee shall receive as compensation for its services hereunder such fees, if
any, as have been separately agreed upon between the Depositor and the Co-Owner
Trustee on or before the date hereof.
Section 8.2 Indemnification. The Depositor shall be liable as primary
obligor, and the Servicer as secondary obligor pursuant to the Administration
Agreement, for, and shall indemnify the Owner Trustee (in its individual and
trust capacities), the Co-Owner Trustee and their successors, assigns, agents
and servants (collectively, the "Indemnified Parties") from and against, any and
all liabilities; obligations, losses, damages, taxes, claims, actions and suits,
and any and all reasonable costs, expenses and disbursements (including
reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee (in its individual and trust capacities) or
any Indemnified Party in any way relating to or arising out of this Agreement,
the Basic Documents, the Owner Trust Estate, the administration of the Owner
Trust Estate or the action or inaction of the Owner Trustee or the Co-Owner
Trustee hereunder, except only that the
26
Depositor shall not be liable for or required to indemnify an Indemnified Party
from and against Expenses arising or resulting from any of the matters described
in the third sentence of Section 7.1 of this Trust Agreement. The indemnities
contained in this Section 8.2 shall survive the resignation or termination of
the Owner Trustee or the Co-Owner Trustee or the termination of this Agreement.
In any event of any claim, action or proceeding for which indemnity will be
sought pursuant to this Section 8.2, the Owner Trustee's or Co-Owner Trustee's
choice of legal counsel shall be subject to the approval of the Depositor, which
approval shall not be unreasonably withheld.
Section 8.3 Payments to the Owner Trustee and the Co-Owner Trustee. Any
amounts paid to the Owner Trustee and/or Co-Owner Trustee pursuant to this
Article VIII shall be deemed not to be a part of the Owner Trust Estate
immediately after such payment.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
Section 9.1 Termination of Trust Agreement.
(a) This Agreement (other than Article VIII) and the Trust shall terminate
and be of no further force or effect on the earliest of: (i) the satisfaction
and discharge of the Indenture pursuant to Section 4.01 of the Indenture and the
termination of the Sale and Servicing Agreement; (ii) the expiration of 21 years
from the death of the last survivor of the descendants of Xxxxxx X. Xxxxxxx (the
late ambassador of the United States to the Court of St. James's) alive on the
date hereof and (iii) an Act of Insolvency with respect to the Depositor. Other
than as set forth in clause (iii) above, the bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder shall not (x) operate
to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate nor (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) The Residual Interest Instruments shall be subject to an early
redemption or termination at the option of the Depositor in the manner and
subject to the provisions of Section 11.2 of the Sale and Servicing Agreement.
(c) Except as provided in Section 9.1(a) and Section 9.1(b), neither the
Depositor nor any Certificateholder shall be entitled to revoke or terminate the
Trust.
(d) Notice of any termination of the Trust, specifying the Distribution
Date upon which the Certificateholders shall surrender their Residual Interest
Instruments to the Paying Agent for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders and
the Rating Agencies mailed within five Business Days of receipt by the Owner
Trustee of notice of such termination pursuant to Section 9.1(a) or Section
9.1(b), which notice given by the Owner Trustee shall state (i) the Distribution
Date upon or with respect to which final payment of the Residual Interest
Instruments shall be made upon presentation and surrender of the Residual
Interest Instruments at the office of the Paying Agent therein designated, (ii)
the amount of any such final payment and (iii) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Residual Interest Instruments at the
office of the Paying Agent therein specified. The Owner Trustee shall give such
notice to the Certificate Registrar (if other than the Owner Trustee) and the
Paying Agent at the time such notice is given to
27
Certificateholders. Upon presentation and surrender of the Residual Interest
Instruments, the Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Distribution Date pursuant to
Section 5.2 of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not surrender their
Residual Interest Instruments for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Residual Interest Instruments for cancellation and receive the final
distribution with respect thereto. If within one year after the second notice
all the Residual Interest Instruments shall not have been surrendered for
cancellation, the Owner Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Residual Interest Instruments, and the cost
thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies shall be distributed by the Co-Owner Trustee to the General
Partner and the Residual Interestholders shall look solely to the General
Partner for payment.
(e) Any funds held by the Issuer after funds for final distribution have
been distributed or set aside for distribution shall be distributed by the
Co-Owner Trustee to the General Partner.
(f) Upon the winding up of the Trust and its termination, the Owner Trustee
shall cause the Certificate of Trust to be canceled by filing a certificate of
cancellation with the Secretary of State in accordance with the provisions of
Section 3820 of the Business Trust Statute.
Section 9.2 Dissolution upon Bankruptcy of the General Partner. In the
event that an Insolvency Event shall occur with respect to the General Partner,
this Agreement shall be terminated in accordance with Section 9.1 90 days after
the date of such Insolvency Event, unless, before the end of such 90-day period,
the Owner Trustee shall have received written instructions from
Certificateholders holding a majority of the Percentage Interest (other than the
General Partner) to the effect that each such party disapproves of the
liquidation of the Loans and dissolution of the Issuer. Promptly after the
occurrence of any Insolvency Event with respect to the General Partner, (i) the
General Partner shall give the Indenture Trustee and the Owner Trustee written
notice of such Insolvency Event, (ii) the Owner Trustee shall, upon the receipt
of such written notice from the General Partner, give prompt written notice to
the Certificateholders and the Indenture Trustee of the occurrence of such event
and (iii) the Indenture Trustee shall, upon receipt of written notice of such
Insolvency Event from the Owner Trustee or the General Partner, give prompt
written notice to the Noteholders of the occurrence of such event; provided,
however, that any failure to give a notice required by this sentence shall not
prevent or delay, in any manner, a dissolution of the Issuer pursuant to the
first sentence of this Section 9.2. Upon a dissolution pursuant to this Section
9.2, the Owner Trustee shall direct the Indenture Trustee promptly to sell the
assets of the Trust Estate in a commercially reasonable manner and on
commercially reasonable terms. The proceeds of such a sale of the assets of the
Issuer shall be treated as collections under the Sale and Servicing Agreement
and shall be distributed in accordance with Section 5.1 thereof.
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ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.1 Eligibility Requirements for Owner Trustee. The Owner Trustee
shall at all times be a corporation satisfying the provisions of Section 3807(a)
of the Business Trust Statute; authorized to exercise corporate powers; having a
combined capital and surplus of at least $_______________ and subject to
supervision or examination by federal or state authorities; and having (or
having a parent which has) a short-term rating of at least "_____" by [Xxxxx'x]
and "______" by [Fitch]. If such corporation shall publish reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section 10.1,
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Owner Trustee shall cease to be eligible
in accordance with the provisions of this Section 10.1, the Owner Trustee shall
resign immediately in the manner and with the effect specified in Section
10.2(b).
Section 10.2 Resignation or Removal of Owner Trustee or Co-Owner Trustee
(a) If an Event of Default under the Sale and Servicing Agreement or an
Event of Default under the Indenture should occur and be continuing, then the
Co-Owner Trustee will resign in the manner specified in Section 10.2(b) and the
Owner Trustee will assume the duties of the Co-Owner Trustee under this
Agreement.
(b) The Owner Trustee or Co-Owner Trustee may at any time resign and be
discharged from the trusts hereby created by giving written notice thereof to
the Administrator and the Indenture Trustee. Upon receiving such notice of
resignation, the Administrator shall promptly appoint a successor Owner Trustee
or Co-Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee or Co-Owner Trustee
and one copy to the successor Owner Trustee or Co-Owner Trustee. If no successor
Owner Trustee or Co-Owner Trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
resigning Owner Trustee or Co-Owner Trustee may petition any court of competent
jurisdiction for the appointment of a successor Owner Trustee or Co-Owner
Trustee.
If at any time the Owner Trustee or Co-Owner Trustee shall cease to be
eligible in accordance with the provisions of Section 10.1 and shall fail to
resign after written request therefor by the Administrator, or if at any time
the Owner Trustee or Co-Owner Trustee shall be legally unable to act, or shall
be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or
Co-Owner Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Owner Trustee or Co-Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Administrator may remove the Owner Trustee or Co-Owner
Trustee. If the Administrator shall remove the Owner Trustee or Co-Owner Trustee
under the authority of the immediately preceding sentence, the Administrator
shall promptly appoint a successor Owner Trustee or Co-Owner Trustee by written
instrument in duplicate, one copy of which instrument shall be delivered to the
outgoing Owner Trustee or Co-Owner Trustee so removed and one copy to the
successor Owner Trustee or Co-Owner Trustee, and shall be responsible for the
payment of all fees owed to the outgoing Owner Trustee or Co-Owner Trustee.
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Any resignation or removal of the Owner Trustee or Co-Owner Trustee and
appointment of a successor Owner Trustee or Co-Owner Trustee pursuant to any of
the provisions of this Section 10.2 shall not become effective until acceptance
of appointment by the successor Owner Trustee or Co-Owner Trustee pursuant to
Section 10.3 and payment of all fees and expenses owed to the outgoing Owner
Trustee or Co-Owner Trustee. The Administrator shall provide notice of such
resignation or removal of the Owner Trustee or Co-Owner Trustee to each of the
Rating Agencies.
Section 10.3 Successor Owner Trustee or Co-Owner Trustee. Any successor
Owner Trustee or Co-Owner Trustee appointed pursuant to Section 10.2(b) shall
execute, acknowledge and deliver to the Administrator and to its predecessor
Owner Trustee or Co-Owner Trustee an instrument accepting such appointment under
this Agreement, and thereupon the resignation or removal of the predecessor
Owner Trustee or Co-Owner Trustee shall become effective and such successor
Owner Trustee or Co-Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties, and obligations
of its predecessor under this Agreement, with like effect as if originally named
as Owner Trustee or Co-Owner Trustee. The predecessor Owner Trustee or Co-Owner
Trustee shall upon payment of its fees and expenses deliver to the successor
Owner Trustee or Co-Owner Trustee all documents and statements and monies held
by it under this Agreement; and the Administrator and the predecessor Owner
Trustee or Co-Owner Trustee shall execute and deliver such instruments and do
such other things as may reasonably be required for fully and certainly vesting
and confirming in the successor Owner Trustee or Co-Owner Trustee all such
rights, powers, duties, and obligations.
No successor Owner Trustee or Co-Owner Trustee shall accept appointment as
provided in this Section 10.3 unless at the time of such acceptance such
successor Owner Trustee or Co-Owner Trustee shall be eligible pursuant to
Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee or Co-Owner
Trustee pursuant to this Section 10.3, the Administrator shall mail notice of
the successor of such Owner Trustee or Co-Owner Trustee to all Owners, the
Indenture Trustee, the Noteholders and the Rating Agencies. If the Administrator
fails to mail such notice within 10 days after acceptance of appointment by the
successor Owner Trustee or Co-Owner Trustee, the successor Owner Trustee or
Co-Owner Trustee shall cause such notice to be mailed at the expense of the
Administrator.
Section 10.4 Merger or Consolidation of Owner Trustee or Co-Owner Trustee.
Any corporation into which the Owner Trustee or Co-Owner Trustee may be merged
or converted or with which it may be consolidated or any corporation resulting
from any merger, conversion or consolidation to which the Owner Trustee or
Co-Owner Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Owner Trustee or
Co-Owner Trustee, shall be the successor of the Owner Trustee Co-Owner Trustee
hereunder, provided such corporation shall be eligible pursuant to Section 10.1,
without the execution or filing of any instrument or any further act on the part
of any of the parties hereto, anything herein to the contrary notwithstanding;
provided further that the Owner Trustee or Co-Owner Trustee shall mail notice of
such merger or consolidation to the Rating Agencies.
Section 10.5 Appointment of Co-Owner Trustee or Separate Owner Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Mortgaged Property may at the time be located,
and for the purpose of performing certain duties and obligations of the Owner
Trustee with respect to the Trust under the Sale and Servicing
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Agreement, the Administrator and the Owner Trustee acting jointly shall have the
power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Owner Trustee to act as co-owner trustee, jointly with
the Owner Trustee, or separate trustee or separate trustees, of all or any part
of the Owner Trust Estate, and to vest in such Person, in such capacity, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 10.5, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If the
Administrator shall not have joined in such appointment within 25 days after the
receipt by it of a request so to do, the Owner Trustee shall have the power to
make such appointment. No co-owner trustee or separate owner trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
trustee pursuant to Section 10.3 and no notice of the appointment of any
co-trustee or separate owner trustee shall be required pursuant to Section 10.3.
The Owner Trustee hereby appoints the Indenture Trustee as Co-Owner Trustee
for the purpose of establishing and maintaining the Certificate Distribution
Account and making the distributions therefrom to the Persons entitled thereto
pursuant to Section 5.2 of the Sale and Servicing Agreement.
Each separate owner trustee and co-owner trustee shall, to the extent
permitted by law, be appointed and act subject to the following provision and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Owner Trustee shall be conferred upon and exercised or performed
by the Owner Trustee and such separate owner trustee or co-owner trustee
jointly (it being understood that such separate owner trustee or co-owner
trustee is not authorized to act separately without the Owner Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Owner Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties, and obligations
(including the holding of title to the Trust or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such separate
owner trustee or co-owner trustee, but solely at the direction of the Owner
Trustee; provided that Co-Owner Trustee, in performing its duties and
obligations under the Sale and Servicing Agreement, may act separately in
its capacity as Co-Owner Trustee without the Owner Trustee joining in such
Acts.
(ii) no owner trustee under this Agreement shall be personally liable
by reason of any act or omission of any other owner trustee under this
Agreement; and
(iii) the Administrator and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate owner trustee or
co-owner trustee.
Any notice, request or other writing given to the Owner Trustee shall be
deemed to have been given to the separate owner trustees and co-owner trustees,
as if given to each of them. Every instrument appointing any separate owner
trustee or co-owner trustee, other than this Agreement, shall refer to this
Agreement and to the conditions of this Article X. Each separate owner trustee
and co-owner trustee, upon its acceptance of appointment, shall be vested with
the estates specified in its instrument of appointment, either jointly with the
Owner Trustee or separately, as may be provided therein, subject to all the
provisions of this Agreement, specifically including every provision of this
Agreement relating to the conduct of, affecting the liability of, or affording
protection to, the Owner Trustee. Each such instrument shall be filed with the
Owner Trustee and a copy thereof given to the Administrator.
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Any separate owner trustee or co-owner trustee may at any time appoint the
Owner Trustee as its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate owner trustee or
co-owner trustee shall die, become incapable of acting, resign or be removed,
all of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Owner Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee. The Owner Trustee and the Co-Owner
Trustee each agree that upon the occurrence and continuation of an Event of
Default, the Co-Owner Trustee shall resign and, upon ten Business Days' notice
from the Co-Owner Trustee, the Owner Trustee shall assume the duties and
obligations of the Co-Owner Trustee under the Sale and Servicing Agreement and
this Agreement, including without limitation, the obligations of the Co-Owner
Trustee as Paying Agent pursuant to Section 3.9 hereof.
The Co-Owner Trustee, in its capacity as Co-Owner Trustee, shall not have
any rights, duties or obligations except as expressly provided in this Agreement
and the Sale and Servicing Agreement.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Supplements and Amendments. This Agreement may be amended by
the Depositor and the Owner Trustee, with prior written notice to the Rating
Agencies, but without the consent of any of the Noteholders or the
Certificateholders or the Indenture Trustee, to cure any ambiguity, to correct
or supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions in
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders provided, however, that such action shall not adversely
affect in any material respect the interests of any Noteholder or
Certificateholder. An amendment described above shall be deemed not to adversely
affect in any material respect the interests of any Noteholder or
Certificateholder if (i) an opinion of counsel is obtained to such effect, and
(ii) the party requesting the amendment satisfies the Rating Agency Condition
with respect to such amendment.
This Agreement may also be amended from time to time by the Depositor and
the Owner Trustee, with the prior written consent of the Rating Agencies and
with the prior written consent of the Indenture Trustee, the Holders (as defined
in the Indenture) of Notes evidencing more than 50% of the Outstanding Amount of
the Notes and the Majority Residual Interestholders, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the Loans or distributions that shall be
required to be made for the benefit of the Noteholders (b) reduce the aforesaid
percentage of the Outstanding Amount of the Notes or the Percentage Interests
required to consent to any such amendment, in either case of clause (a) or (b)
without the consent of the holders of all the outstanding Notes, and in the case
of clause (b) without the consent of the holders of all the outstanding Residual
Interest Instruments.
Promptly after the execution of any such amendment or consent, the Owner
Trustee shall furnish written notification of the substance of such amendment or
consent to each Residual Interestholder, the Indenture Trustee and each of the
Rating Agencies.
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It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Indenture Trustee pursuant to this Section 11.1 to approve
the particular form of any proposed amendment or consent, but it shall be
sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents (and any other consents of Certificateholders provided
for in this Agreement or in any other Basic Document) and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of Trust,
the Owner Trustee shall cause the filing of such amendment with the Secretary of
State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement. The Owner Trustee may, but shall not
be obligated to, enter into any such amendment which affects the Owner Trustee's
own rights, duties or immunities under this Agreement or otherwise.
Section 11.2 No Legal Title to Owner Trust Estate in Certificateholders.
The Certificateholders shall not have legal title to any part of the Owner Trust
Estate. The Certificateholders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Article V and Article IX. No transfer, by operation of law or otherwise, of any
right, title, or interest of the Certificateholders to and in their ownership
interest in the Owner Trust Estate shall operate to terminate this Agreement or
the trusts hereunder or entitle any transferee to an accounting or to the
transfer to it of legal title to any part of the Owner Trust Estate.
Section 11.3 Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Depositor, the
Owners, the Administrator and, to the extent expressly provided herein, the
Indenture Trustee and the Noteholders, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
Section 11.4 Notices. (a) Unless otherwise expressly specified or permitted
by the terms hereof, all notices shall be in writing and shall be deemed given
upon receipt by the intended recipient or three Business Days after mailing if
mailed by certified mail, postage prepaid (except that notice to the Owner
Trustee shall be deemed given only upon actual receipt by the Owner Trustee), at
the following addresses: (i) if to the Owner Trustee, its Corporate Trust
Office; (iii) if to the Depositor, Home Equity Securitization Corp., Attention:
_________________; (iv) if to the Co-Owner Trustee, _______________________,
_______________, Attention: ______________________________; or, as to each such
party, at such other address as shall be designated by such party in a written
notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.
33
Section 11.5 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.6 Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 11.7 Successors and Assigns. All covenants and agreements contained
herein shall be binding upon, and inure to the benefit of, the Depositor, the
Owner Trustee, the Co-Owner Trustee and its successors and each
Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by a Certificateholder shall bind the successors and assigns of such
Certificateholder.
Section 11.8 No Petition. The Owner Trustee (not in its individual capacity
but solely as Owner Trustee) and the Co-Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Residual Interest Instrument,
and the Indenture Trustee and each Noteholder by accepting the benefits of this
Agreement, hereby covenant and agree that they will not at any time institute
against the General Partner, the Depositor or the Trust, or join in any
institution against the General Partner or the Trust of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Residual Interest
Instruments, the Notes, this Agreement or any of the Basic Documents.
Section 11.9 No Recourse. Each Certificateholder by accepting a Residual
Interest Instrument acknowledges that such Certificateholder's Residual Interest
Instrument represents a beneficial interest in the Trust only and does not
represent an interest in or an obligation of the Servicer, the Depositor, the
Administrator, the Owner Trustee, the Co-Owner Trustee or any affiliate thereof
and no recourse may be had against such parties or their assets, except as may
be expressly set forth or contemplated in this Agreement, the Residual Interest
Instruments or the Basic Documents.
Section 11.10 Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 11.11 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.12 Bankruptcy Matters. No party to this Agreement shall take any
action to cause the Issuer to dissolve in whole or in part or file a voluntary
petition or otherwise initiate proceedings to have the Issuer adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against the Issuer, or file a petition seeking or consenting to
reorganization or relief of the Issuer as debtor under any applicable federal or
state law relating
34
to bankruptcy, insolvency or other relief for debtors with respect to the
Issuer; or seek or consent to the appointment of any trustee, receiver,
conservator, assignee, sequestrator, custodian, liquidator (or other similar
official) of the Issuer or of all or any substantial part of the properties and
assets of the Issuer, or cause the Issuer to make any general assignment for the
benefit of creditors of the Issuer or take any action in furtherance of any of
the above actions unless each Certificateholder shall have provided its written
consent, stating that it reasonably believes the Issuer to be insolvent.
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
HOME EQUITY SECURITIZATION CORP.
By: _______________________________
Name: _____________________________
Title: ____________________________
________________________________, not in
its individual capacity but solely as Owner
Trustee
By: _______________________________
Name: _____________________________
Title: ____________________________
_______________________________, not in
its individual capacity but solely as
Co-Owner Trustee and Paying Agent
By: _______________________________
Name: _____________________________
Title: ____________________________
35
FORM OF RESIDUAL INTEREST INSTRUMENT
THE RESIDUAL INTEREST IN THE TRUST REPRESENTED BY THIS RESIDUAL INTEREST
INSTRUMENT HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THIS RESIDUAL
INTEREST MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF
(INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT PURSUANT TO RULE 144A AND SUCH
LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE TRUST OR
AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED TO, HOME EQUITY
SECURITIZATION CORP.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS
RESIDUAL INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS.
NO TRANSFER OF THIS RESIDUAL INTEREST INSTRUMENT OR ANY BENEFICIAL INTEREST
THEREIN SHALL BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE AND THE CERTIFICATE
REGISTRAR HAVE RECEIVED A CERTIFICATE FROM THE TRANSFEREE TO THE EFFECT THAT
SUCH TRANSFEREE IS NOT (I) AN "EMPLOYEE BENEFIT PLAN" WITHIN THE MEANING OF
SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA"), THAT IS SUBJECT TO TITLE I OF ERISA, (II) OF "PLAN" WITHIN THE
MEANING OF SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) AN ENTITY,
INCLUDING AN INSURANCE COMPANY SEPARATE ACCOUNT OR GENERAL ACCOUNT, WHOSE
UNDERLYING ASSETS ARE DEEMED TO INCLUDE ASSETS OF A PLAN DESCRIBED IN (I) OR
(II) ABOVE BY REASON OF SUCH PLAN'S INVESTMENT IN THE ENTITY.
__________ TRUST _____
RESIDUAL INTEREST CERTIFICATE
No. 1-T
THIS CERTIFIES THAT _______________, (the "Owner") is the registered
owner of a 99% residual interest in ________________ Trust _______ (the "Trust")
existing under the laws of the State of Delaware and created pursuant to the
Trust Agreement dated as of __________________ (the "Trust Agreement") among
Home Equity Securitization Corp., as the Depositor, [ ______________ ], not in
its individual capacity but solely in its fiduciary capacity as owner trustee
under the Trust Agreement (the "Owner Trustee") and
________________________________, as Co-Owner Trustee (the "Co-Owner Trustee").
36
Capitalized terms used but not defined herein have the meanings assigned to them
in the Trust Agreement. The Owner Trustee, on behalf of the Issuer and not in
its individual capacity, has executed this Residual Interest Instrument by one
of its duly authorized signatories as set forth below. This Residual Interest
Instrument is one of the Residual Interest Instruments referred to in the Trust
Agreement and is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement to which the holder of this Residual Interest
Instrument by virtue of the acceptance hereof agrees and by which the holder
hereof is bound. Reference is hereby made to the Trust Agreement and the Sale
and Servicing Agreement for the rights of the holder of this Residual Interest
Instrument, as well as for the terms and conditions of the Trust created by the
Trust Agreement.
The holder, by its acceptance hereof, agrees not to transfer this Residual
Interest Instrument except in accordance with terms and provisions of the
Agreement.
THIS RESIDUAL INTEREST INSTRUMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not in
its individual capacity, has caused this Residual Interest Instrument to be duly
executed.
_____________ TRUST 1997-2
By: _______________________, not in its
individual capacity but solely as
Owner Trustee under the Trust Agreement
By:______________________________
Authorized Signatory
37
DATED:___________
CERTIFICATE OF AUTHENTICATION
This is one of the Residual Interest referred to in the within-mentioned
Agreement.
___________________________________ as
Authenticating Agent
By:_____________________________
Authorized Signatory
38
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
_______________________________________________________________________________
(Please print or type name and address, including postal zip code, of
assignee)
_______________________________________________________________________________
the within Instrument, and all rights thereunder, hereby irrevocably
constituting and appointing
____________________________________________________________________ Attorney to
transfer said Instrument on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:________________
_________________________________________*/
Signature Guaranteed:
_________________________________________*/
_______________________
*/ NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Residual Interest Instrument in every
particular, without alteration, enlargement or any change whatever. Such
signature must be guaranteed by a member firm of the New York Stock Exchange or
a commercial bank or trust company.
39
